How well is a country's or region's administration organized; how widespread is corruption; are institutions established that
guarantee the rule of law; is there a separation of powers? These are the questions that distinguish failed from functioning states. A
well organized, reliable, and fair state is certainly not sufficient to make a country a superpower, but it is an important
precondition.
Corrupt dictatorships may flourish for a few decades if they can rely on an abundant natural resources, such as oil or gas; but once
the resource is gone, or its price has plummeted, the regime will collapse like a house of cards - or it will linger on as a failed
state (as so many nations in Africa and Latin America). Entrepreneurs will start new businesses and create economic prosperity only in
a country with functioning institutions and a reliable legal system. People are only productive, creative and willing to work hard if
they can expect that their efforts are fairly rewarded and their rights respected.

Human rights & the rule of law

The reader may be surprised that we consider the rule of law and a guarantee of basic human rights preconditions of global dominance.
Were there not numerous dictatorships in history, one might ask, that have gained widespread influence, such as the German Nazi regime
or the Soviet Union under Stalin? In fact, there is always the danger, that ruthless regimes might dominate the world; but
fortunately, in the past they usually collapsed rather quickly from their own structural deficits or were defeated by a coalition of
their enemies.
In the future, it will be increasingly difficult for corrupt dictatorship to gain global power due to the complexity of the modern
(economic) world. One can certainly destroy a high-tech economy and suppress its citizens, but one cannot promote economic development
with terror and fear. Traumatized and tortured citizens cannot be creative and motivated to invent and produce new products and
services, which is one of the core activities in a modern society.

Corruption is a silent cancer that can grow untreated for decades without fatal consequences. Some societies seem to work pretty well
with low-intensity corruption. But eventually the cancer of corruption will spread and permeate all spheres of political, social and
economic life.
There are many forms of corruption including bribery, extortion, cronyism, nepotism, extreme patronage, graft and embezzlement.
Corruption undermines good governance by disregarding and undermining fair processes of decision making. And corruption often comes
with other criminal activities, such as drug trafficking, money laundering, or human (sexual) exploitation.
Corruption is said to "grease bureaucratic processes", but actually it is like "sand in a gearbox": It wears down the legitimacy of an
administration, distorts markets, and increases the costs of business. Corruption can destroy the reputation of educational
institutions ("bought" diplomas), products or sport events. It can even lower public health when operations or drugs are compromised
or only available through bribes.
The line between legitimate representation of interests and subtle forms of political corruption may be narrow. Large donations of
wealthy citizens or businesses to political parties with the intention to influence political decisions or extreme forms of organized
lobbying may also be seen as corruption.

The idea of a separation of powers in governance was developed in ancient Greece, but it is one of the universal principles
that are essential for good governance. The basic idea is quite simple: Those people and institutions who make political decisions and
rule a country should not be the same as those who establish legal norms or control their compliance. This division of labor in a
state between executive, legislature, and judiciary is the only mechanism that can prevent autocracy, where power is concentrated in
the hands of a supreme leader or ruling group without legal restraints or public control. Separation of powers is the foundation of
democracy.

Eoin Carolan (2009)
The New Separation of Powers. A Theory for the modern state. Oxford University Press

Samuel Moyn (2012)
The Last Utopia. Human rights in history. Belknap Press

Francis Fukuyama (2014)
Political Order and Political Decay. From the industrial revolution to the globalization of democracy. Farrar, Straus and Giroux

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Control density

The phrase may sound strange, but it is intended to describe the degree of care, regulation and control that is exercised by state
institutions. At one extreme we have the "nanny state", where institutions take care of, regulate and control citizens from the cradle
to the grave; at the other extreme we have a "minimal state", which only provides the most essential services and refrains from
intervention as much as possible. Nanny states (or "big government" states) may have extensive social security, state-run health care
systems, generous unemployment benefits, state-financed schools and universities, lavish maternity leave regulations and tax-funded
(or co-funded) pension systems. They might also regulate many economic activities with extensive licenses, standards, and quality
controls. And they may try to improve people's health, wellbeing and even morals by numerous regulations - such as a high legal
drinking age, prohibition of alcohol, punishment of prostitution and pornography, mandatory bicycle helmets and safety belts, gender
quotas, limitations on sugar, fat and salt content in food, calorie restrictions for fast-food, and many more.
Minimal states, on the other hand, would focus on core functions, such as national defense, critical infrastructure, legal frameworks,
international relations, or domestic security. Health care, education, social security or the pension system would be privatized. Such
services would be provided by businesses, insurances and philanthropic or religious organizations. Regulations of economic activities
would be minimal; licenses would be easy to get and the setting of standards would be left to businesses, trade organizations and
markets.
For a country to be successful in global competition both extremes in control density would be detrimental. Paternalistic nanny states
quickly reach limits of public (social) spending when a significant percentage of GDP is cycled through the various state sectors.
Taxes and fees for funding government tasks are reaching such a high percentage of personal income that people become discouraged in
their economic activities. The bureaucracy of a welfare state, which is not subject to market competition, expands and thus
inefficiency and waste of resources typically increases. Small governments, on the other hand, quickly become cold-hearted and brutal
against those citizens who have health problems, are old, or less able to cope with the stress and workload of a highly competitive
labor market. Since small governments abstain as much as possible from intervention in people's private life unsocial and
self-destructive behavior will spread, such as alcoholism, smoking, addictive gambling, over-eating or vandalism. Complete
privatization and radical deregulation of (product, financial and labor) markets leads to a primitive form of "cut-throat capitalism",
which creates a large underclass of working poor and tiny elite of super rich.

Fang Cai / John Giles et al. (2012)
The Elderly and Old Age Support in Rural China.
World Bank Publications

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Links to comparative analyses (in preparation)

In these analyses we will compare China, Europe, and the USA and ask, which of them guarantees human rights and the rule of law,
combats corruption, has implemented a clear division of powers and a reasonable level of control density . These will be our criteria
to asses each country's or region's institutions and laws: